Common Intellectual Property Scams

Small brand owners and self-proprietors are often the target of intellectual property scams that are intended to elicit quick cash from innocent owners.  For instance, a recent story from Nebraska details how a small coffee shop was targeted by these scammers.

In Nebraska, the scammers sent an official-looking letter to the local coffee shop advising the owners of Muglife Coffee to register their trademark and brand on “international trademark registries” to potentially avoid losing rights to their mark.  The letters asked the coffee shop owner to pay over $2,500 each time to “register” their trademark.

As most experienced intellectual property counsel know, private companies have long been running these types of scams.  Even the United States Patent and Trademark Office has published official warnings on their government websites, warning trademark owners against “registering” with these third-party registries.

Fortunately, in this case, the owners of Muglife wisely consulted an experienced trademark attorney who immediately advised the owners to ignore the letter.  Despite this, however, many brand owners still fall into this trap every year.  These fly-by-night companies often prey on well-intentioned owners who are eager to protect their growing brand.  In an attempt to curb this abuse, the U.S. Patent and Trademark Office maintains a list of well-known scammers on their website to put owners on notice of these unsavory acts.

This practice, however, is not limited only to the United States.  Foreign versions of the scam are rampant, and the World Intellectual Property Organization has also consistently issued warnings, memorandums, and directives about these fraudulent practices.  To date, at least fifteen foreign intellectual property offices have issued official warnings about these schemes.

While trademarks appears to be the weapon of choice for these fraudsters, it is not uncommon for them to dabble in other aspects of intellectual property law.  For instance, “patent trolling” has become increasingly popular in the last two decades and has often made headlines in both the United States and abroad.  The most common form of patent trolling involves unscurupoulous organizations sending out massive amounts of demand letters, asing for quick payment of “damages” lest there be swift consequences for a lack of cooperation.

More recently, domain name scams have also become common.  These scams generally involve asking the domain owner to purchase additional services or domains via a unnecessary third party.  In cooperating, brand onwers often unwittingly may grant a portion of their intellectual property rights to these third parties.

Unfortunately, once a brand owner falls victim to the schemes, there is not much room for recourse.  The U.S. Patent and Trademark Office states that there is no official or legal way to pursue damages or refunds from these unscrupulous third parties because the conduct is not technically illegal as required by the law.  As such, it is the U.S. Patent and Trademark Office highly recommends hiring experienced intellectual property attorneys to help brand owners navigate the complex legalities of registration, maintainence, and protection of intellectual property rights.  A simple and quick consultation can provide owners with significant savings in the long run as well as peace of mind.


Spotify versus Pandora—the Difference isn’t Simply User-Preference

While brand names like Spotify and Pandora have become synonymous with music streaming on the Internet, most customers do not understand that a subtle but significant difference between the business models of Spotify and Pandora greatly impact the way licensing revenues are treated and how artists are compensated.

Traditionally, radio play has accounted for a large amount of income generated by music artists.  Music artists and their publishers are generally paid a percentage of royalties each time a song is broadcast via radio waves.  Naturally, because radio play constitutes public performance of a musical piece, copyright law often governs radio play as well as the streaming of songs through Internet services.  As such, performance rights organizations (“PROs”) generally manage and handle the negotiation of royalties, percentages, and distribution of income to music rightsholders.

Even if you are not in the industry, most of the general public has become familiar with famous PROs such as Broadcast Music Inc. (“BMI”), the American Society of Composers, Authors and Publishers (“ASCAP”), and the Society of European Stage Authors and Composers (“SESAC”).

As the digital revolution has brought about new streaming services, new PROs have also arrived on the scene to negotiate the percentage of royalties to be collected for music streamed or performed via a digital platform.  SoundExchange, specifically, has emerged as one of the most preeminent PROs operating in the digital space.  .

While most recognize that Pandora and Spotify stream music through different models (i.e., on-demand vs. station-play), few recognize that this significantly impacts the licenses each company negotiates with rightsholders.  For instance, to be able to provide songs on-demand, Spotify must specifically request permission and pay specific royalties tied to that song whenever a user selects a song to be played on-demand.  Pandora, on the other hand, has historically negotiated large, overarching licenses to an artist’s music catalogue, allowing them to stream an artist’s entire catalogue, subject to less control from the artists and PROs, because the end-user consumer has no direct control over which song is to be played or if that song can even be repeated or rewound.

While Spotify’s on-demand model has made it incredibly popular with end users, Spotify claims that is has been unable to turn a profit since its inception, particularly because its income streams must often be immediately funneled back as payment for rights to play each song.  Spotify’s “market share” payment approach, which pays artists a fixed price per song or album based on their market share (i.e., the number of streams per songs in proportion to the total songs streamed)  has led to Spotify paying approximately 70% of their income to rightsholders directly, who then go on to pay artists from that compensation received.  As a result, Spotfiy has come under fire from many high-profile artists, including Taylor Swift and Radiohead, who claim that they receive very little compensation despite massive streaming of their songs on Spotify.

Despite Spotify’s woes, however, Pandora has decided to move forward with plans to launch their own premium on-demand subscription service.  Even though Pandora has also long been intertwined in legal disputes with PROs (e.g., ASCAP) over the payment of royalty fees, their entrance into the on-demand streaming service marks a new chapter in the digital streaming revolution.  Industry experts are eager to observe Pandora’s maneuvers in the new space and see how licensing law and contracts adapt to the increasingly expansive presence of music streaming services and their impact on royalties and artists’ compensation.




The U.S. Copyright Office Comes Online

On December 1, 2016, the United States Copyright Office made significant changes to how they handle receipt of “notice” under the Digital Millennium Copyright Act (“DMCA”).  Specifically, the U.S. Copyright Office has decided to revamp how it manages its directory of “copyright agents,” which is a compendium of agents who are registered with the U.S. Copyright Office as official agents designated to receive notices of claims of online copyright infringement.

Previously, the U.S. Copyright Office allowed online service providers to submit registration via paper mail, but now, starting December 2016, the Copyright Office is moving to an entirely electronic system.  For many online service providers, this means that they must re-register their designated agents with the U.S. Copyright Office.

So bottom line, what do people need to know?

  • You must re-register an agent of receipt with the U.S. Copyright Office as the designated agent to receive any notices of claims of copyright violation (this can be done with an electronic account through the new online system; failure to do so may result in a lapse of Safe Harbor protection);
  • Designations now expire, and as such, must be renewed periodically. The U.S. Copyright Office expects that service providers renew or extend filings with the U.S. Copyright Office.  (Although at first blush, this may seem extremely tedious, it makes a lot of sense because service providers and domain ownership can change overnight, and this change shifts the burden back to the service providers to keep the U.S. Copyright Office up-to-date on correct email addresses, etc.  To aid in the transition to the new electronic system, the U.S. Copyright Office has assured service providers that they that they will send out automated reminders to designated agents to inform them about upcoming renewal deadlines and procedures; and
  • Service providers now have greater flexibility in designating “copyright agents.” These new rules specifically define what an “agent” can be under the definition set forth by the U.S. Copyright office.  For example, service providers can now designate any of the following as an agent of receipt:
    1. A natural person;
    2. A specific position or title within an organization (e.g., Compliance Officer)
    3. An entire department within an organization (e.g., Legal Dept.); or
    4. A third-party entity (i.e., law firm, subsidiary or holding company)

With these new changes, it would behoove business organizations to designate specialized law firms or counsel as their copyright agent to streamline the process as the U.S. Copyright Office is unlikely to be sympathetic to institutions that do not quickly conform to the new rules.

All previously registered agents should strive to re-register by the end of 2017.  Likewise, organizations should also take advantage of the new pricing fee structure in place.  Fees now run a flat $6 per designation, amendment, and renewal, as opposed to the previous $10 additional fee required for aliases/connected business entities (which was often a further complication for the U.S. Copyright Office.)


Michael Jordan’s Recent Trademark Win in China Raises Hopes of Other Famous Brand Owners

Earlier this month, China’s Supreme People’s Court passed down a decision in favor of basketball star, Michael Jordan.  Jordan had been waging a four-year battle with a Chinese sporting goods company, Qiaodan Sports Company, Ltd. (“Qiaodan”).

In finding for Jordan, China’s Supreme People’s Court held that “Jordan” in its Chinese character equivalency still referred specifically to Michael Jordan, and as such, the Supreme People’s Court declined to maintain protection of the Qiaodan’s trademark that had been registered for use in  multiple classes in connection with Jordan’s surname.  In finding for Jordan, China’s Supreme People’s Court overturned the previous ruling of a lower court that had granted the protection to Qiaodan.

Despite this, however, China’s Supreme People’s Court declined to extend protection of the mark to Jordan’s phonetic Chinese equivalency, “Qiaodan,” stating that Jordan had not established any link between himself as the star athlete and the Chinese phonetic spelling.

As such, while Jordan has achieved victory in his trademark claims, the win can only considered a partial win, and as a s result, many other famous brand owners that are facing current situations may not automatically rely on this recent verdict as finite change in the Chinese trademark system.  Because the Chinese trademark law favors “first-to-register” as opposed to the “first to use” trademark registration system used in the United States, Trademark squatting has become  rampant in China.

Many famous brand owners, including President-elect, Donald Trump, have often had difficulty with the Chinese trademark office once it become stime to once they begin waging with trademark squatters.  As such, many legal practioners have begun to counsel clients in the necessity of registering not the original mark in its native language, but suggest also registering the mark in both its Chinese character and phonetic equivalencies.

While many applaud this recent legal victory, experts in the field note that the case does not provide much guidance in terms of deterrence or damages.  Because China’s Supreme People’s Court declined to announce any penalties for the violation, many experts feel that the holding will have little impact on curbing the overall practice of trademark squatting.  As trading off or palming off a famous trademark’s goodwill can be incredibly lucrative, the lack of penalties may do little to deter would-be trademark counterfeiters or pirates.

While this victory is a win for Jordan, the basketball superstar is still embroiled in other Chinese trademarks concerning his famous brand, and as such, must continue pursuing rights of exclusivity to his name in the Chinese trademark arena.  As Jordan and the appeal of other famous brand owners’ continue to make their way through the Chinese appeals systems, legal practioners should counsel their clients regarding the new fees structure and changes in it equivalences of their brand names when the budget permits.

Is this the End of the Rocket Docket’s Dominance Among Patent Venues?

As most practitioners know, it is not uncommon practice for litigants to forum shop and file lawsuits in courts that they consider to be friendly to their cause.  For example, the Eastern District of Texas has carved out such a niche, establishing a reputation among patent practitioners as “The Rocket Docket” by resolving patent cases quickly as well as for frequently trying patent suits before juries.  As a result, tiny Texas towns such as Tyler and Marshall became common names and battlegrounds for technology giants, and patent law precedent was often set in the Eastern District of Texas.

Despite its speedy processing of patent cases, however, critics of the Rocket Docket claim that its popularity as venue actually stems from its juries’ tendency to favor plaintiff claims.

Either way, this is all poised to change with the U.S. Supreme Court’s recent agreement to hear TC Heartland, LLC. V. Kraft Food Brands Group, LLC.  In 2014, Kraft had originally sued TC Heartland for patent infringement in the District of Delaware.  Delaware is another popular venue for patent owners, and Kraft Foods is incorporated in Delaware.

TC Heartland moved to dismiss the claims for lack of personal jurisdiction and alternatively sought to transfer the case to its home base in Indiana.  When the district court denied its motion, TC Heartland, a producer of beverage sweeteners, asked the Supreme Court to consider setting aside decades-old precedent that allows for patent suits to be brought in any district where a corporate defendant “resides.”

Although the Rocket Docket is not actually hosting the suit, the Supreme Court’s agreement to hear the case could potentially eliminate the concentration of patent cases in the Eastern District of Texas because both the U.S. Patent and Trademark Office and Congress have signaled interest in reforming the law in a way that would discourage “forum shopping.”  Such reform could also have significant impact on litigation brought by “patent trolls,” as critics have long said that certain judicial districts have procedures and histories of ruling in favor of patent trolls.  In support of their argument, critics note that the Eastern District of Texas, which does not host the headquarters of any major technology companies, heard more than forty percent of all patent cases filed there last year.

TC Heartland’s appeal already has the support of major industry groups that that include Internet retailers, software companies, and major providers of financial services.  As such, a decision by the Supreme Court in favor of TC Heartland could gut the current tradition of filing lawsuits in East Texas even if the case did not originate there.  According to the U.S. Supreme Court’s blog, the case will be heard in late winter or early spring, leaving practioners on both sides on the aisle to eagerly await the high court’s decision.

Will 2017 the Year of the Hacker?

As 2016 comes to an end, experts noted that the introduction of the Internet of Things and the proliferation of more and more “smart” devices is poised to make 2017 the “Year of the Hacker.”

The Internet of Things refers to a development of the Internet in which everyday objects have network connectivity that allows them to both send and receive data.  Everyday objects such as coffee makers and refrigerators are among devices that have become “smart,” and such devices constituted a large portion of popular gifts this past holiday season.  Currently, experts estimate that smart devices number around 12 billion and will rise to over 30 billion by the end of 2020.

Even as consumers laud the introduction of the Internet of Things, cybersecurity experts warn that smart home devices make home networks extremely vulnerable due to a combination of inherent poor programming and a lack of consumer awareness.

Without federal guidance in place, manufacturers have no true incentive to ensure that smart devices are secure.  As a result, in October of 2016, hackers were able to attack and gain control to over 10,000 smart devices, allowing them to block access to well-known services such as Netflix and Twitter.  The most popular type of attacks that hackers utilized against smart devices are known as distributed denial of services (“DDoS”) attacks.  While DDoS attacks typically keep consumers from being able to utilize specific services or websites, some DDoS attacks may also be used as cover for much more sophisticated and sinister cyberattacks.

Hackers also typically like to time their DDoS attacks to coincide with peak times of usage.  For example, gaming services such as Xbox Live, Blizzard Entertainment, and the PlayStation Network often experience a rise in the frequency of these attacks during peak service times such as Christmas or Black Friday.

Fortunately, the government is finally beginning to recognize the importance of cybersecurity.  In response to the blitz attacks of October, the Department of Homeland Security released guidelines and strategic principles for usage of the Internet of Things in November of 2016, calling the vulnerability of smart devices a “matter of homeland security.”  Similarly, Senator Mark Warner, a senator from Virginia and member of the Senate Select Committee on Intelligence, has co-founded the Senate Cybersecurity Caucus in response to the growing threat.  Warner has noted that, “I think all of us, from industry to […] government are going to have to up our game in terms of making sure these devices are safe from the very real threat of cyber hackers.”

In the meantime, experts warn that consumers may want to wait on adopting early technology, especially as current federal guidelines are neither binding or regulatory.  For consumers who have already invested in smart devices, experts suggest that, at the very least, they make sure to change any default password settings on smart devices and ensure that they always update their firmware or software to the latest patch to ensure that they properly apply any of the manufacturer’s latest security updates.

Are Smart Devices Always Listening?

After a man was found murdered in a hot tub, Arkansas police are asking for access to the electronic data records of a smart device located in the hot tub owner’s home.

After Victor Collins was found strangled to death in James Andrew Bates’ hot tub, Arkansas police have asked Amazon to provide them with the electronic data captured from Bates’ Amazon Echo device.  Although the smart device is not always recording, law enforcement is banking on the fact that the device is “always listening” as it must do so in order to recognize its wake word (“Alexa”) by default.

Amazon disputes law enforcement’s claims, however, arguing that the Echo stores less than sixty seconds of recorded sound in its storage cache at any time, and as such, any information captured by the Echo would likely be insignificant.  Amazon argues that compliance with such a carte blanche request would give law enforcement unnecessary access to consumer data and information.  Moreover, Amazon points out that, in order to process new commands, the Echo smart device must constantly erase and overwrite old data in order to optimize storage and data capacity.  Specifically, Amazon notes that the Echo only records and sends a small amount electronic data to the cloud.  That data, which is recorded upon utterance of the wake word, is then converted into text that the Amazon Echo software can recognize and can act upon.  Although Amazon does save these audio commands by default, users are also given the option to manually erase recordings and can even opt out by turning off the Echo’s microphones so that it is not “always listening.”

Despite this, the Arkansas Bentonville Police Department has requested “electronic data in the form of audio recordings, transcribed records or other text records related to communications and transactions between an Amazon device” at Bates residence and from Amazon’s services for the dates between November 21st to November 22nd.  While Amazon has agreed to provide the police department with Bates’ purchase history, they stated that they would not release any of its customer information without valid and binding legal demands.  Even without Amazon’s cooperation, however, the police have proceeded to confiscate Bates’ Amazon Echo in an attempt to extract information from it, and it is currently unclear what information they have been able to procure by their own means.

Privacy advocates and Bates’ lawyer alike have already raised concerns about the police seizure and demands concerning the smart device, citing similarities to “a police state.”  Privacy groups such as the Voice Privacy Industry Group note that smart devices such as the Echo should not be described as “always listening” and that law enforcement’s attempts to use smart devices against their owners are misguided.  Moreover, these privacy groups warn that with the further introduction of the Internet of Things, such seizure and use of smart devices in criminal investigations should be deterred.  These advocates instead argue that the government must set “clear legal standards” and likewise require that manufacturers “adopt techniques for data minimization and data deletion” because smart devices that consistently retain data are no longer simply targets for criminal hackers, but may now become targets for law enforcement as well.